Problem:

In May 1988, Walt Disney Productions sold to Japanese investors a 10- year stream of projected yen royalties from Tokyo Disneyland. The present value of that stream of royalties, discounted at 6% (the return required by the Japanese investors), was 90 billion yen. Disney took the yen proceeds from the sale, converted them to dollars, and invested the dollars in bonds yielding 10%. According to Disney chief financial officer, they got money at 6% discount rate, reinvested it at 10%, and hedged their royalty stream against yen fluctuations.

Required:

Question: Demonstrate the equivalence between Walt Disney's transaction and a currency swap.

Note: Be sure to show how you arrived at your answer.